How To Find A Good Financial Adviser
In this video, I go over where to find a good financial adviser and the questions to ask a financial adviser before hiring one!
FULL TRANSCRIPT: HOW TO FIND A GOOD FINANCIAL ADVISOR – QUESTIONS TO ASK A FINANCIAL PLANNER BEFOR HIRING
Are you trying to figure out how to find a good financial advisor? I've got the answers and the resources for you coming up.
Hey there folks! Patrick King here, financial planner and host of Transformative Television. Here on this channel, we help people who are going through a divorce, people who are dealing with the loss of a spouse or a loved one, or people who are just plain trying to transform their lives in a positive way. If that's you, please consider subscribing. And if you need financial planning help going through any of these transitions, please give me a call.
Here today in this episode, what I want to do is share with you, how the heck do you find a good financial planner? Obviously this is something very near and dear to my heart and if you look down on the links, you can click through and download all of my tips here, all of my questions to ask potential financial planner. Download that and use that in your search.
WHERE TO FIND A FINANCIAL ADVISER
All right! So, how the heck do you find a good financial adviser? So if you're looking for somebody that knows what they're doing and will put your interests ahead of their own, there are a few resources that I recommend.
The first one is NAPFA, the National Association of Personal Financial Advisors, of which I am a member. So NAPFA is the community of fee-only, fiduciary financial advisors across America
You can go there, search your area and you'll find someone who is a fiduciary. So, what does that mean? That means that they are legally required to put your interests ahead of their own.
Why is that important? Well, hey, turns out the majority of financial advisors are really brokers in disguise and they're just required to give you what's "suitable". I would much rather have what's in my best interests than something that's just okay or not inappropriate, in other words.
So obviously, it's something I very much believe in. I believe that is THE way to take care of clients if you're a financial adviser.
Another resource that I recommend is the Certified Financial Planner Board of Standards - the CFP Board. The CFP® is a designation that most real financial planners have. It's a legit deal. It's not just something that you can buy and stick on the end of your name. It comes with a grueling test and an education and experience requirement
So if you're working with a CFP® professional, you know you're working with someone who's a dedicated financial planning professional. You can go there,
you can search for your ZIP code, and find a well-regarded professional financial advisor there.
Another organization I want to encourage you to check out is the XY Planning Network. Now, this is a group of fee-only, fiduciary financial advisors designed to work with Gen X and Gen Y clients by offering different types of fee schedules.
So the old-school way of doing things was to charge a percentage of the assets that the advisor managed. But most of those type of firms have high minimum investment amounts and not everyone has a million bucks, say, to get started with an advisor. But you still need that advice.
So the XY Planning Network advisors typically have either hourly, flat fee or retainer based fee structures so they can work with folks like you. So check them out. It might be a little bit better of a fit. Full disclosure, I'm a member of XY Planning Network.
All right. So one last thing, as you're looking, that I want to encourage you to watch out for in this case is word-of-mouth recommendations. I would be very careful with them. It turns out that most of the financial advisors out there are really brokers in disguise. So if you're talking with a buddy and they say, "Hey, my guy will hook you up," be careful with that because you don't know how their guy is really operating.
Which leads me to my next point: once you've found some potential financial planners, financial advisors, check them out! You can do a background check thanks to FINRA's BrokerCheck website. I'll post the link in the notes below
If they've got any kind of censures or any kind of issues in their background, it will show up there and you will know right away. You can cross that person off your list. So check them out on BrokerCheck.
QUESTIONS TO ASK A FINANCIAL ADVISER BEFORE HIRING
Okay, you found a list of potential financial advisors. You've done a background check using FINRA's BrokerCheck website. How the heck do you find out if these are good folks?
Well of course, call and get a consultation. Getting a consultation with a financial advisor may be the least difficult thing that you do today! But once you get that face-to-face meeting, ask them a few questions to make sure that they're legit.
So because I'm a financial advisor, I want to defer and say that some of these questions come from the Intelligent Investor column from August 2017 the Wall Street Journal. Link in the show notes - check it out
But having done this for a long time and seeing it done the right way and the wrong way, here are some of those questions that I think are important for you to ask when you're interviewing a financial adviser.
Okay, so question number one in interviewing a financial adviser, in my opinion the most important one: do you always act as a fiduciary in dealing with your clients? And if so, will you put as much in writing?
Again a fiduciary is someone who's legally required to put your interests ahead of their own. And if you're dealing with somebody that's not willing to do that, well I can't help you. If they're not a fiduciary, cross them off the list and move on to the next person.
All right, so question two: do you receive any kind of referral fees or any kind of income from someone other than your clients? Because if your advisor is getting paid by someone other than you, that's a potential conflict of interest there and you want to know what those are. So that's question two.
All right, so question three: do you participate in any kind of sales program - like rewards program? Do you have any kind of quarterly or annual sales required targets? Your life savings shouldn't be someone's quarterly sales goal.
All right next question, please disclose your conflicts of interests. Okay! Sounds pretty obvious, right? But there's always a conflict of interest, even with fee-only, fiduciary advisors.
There's a potential conflict of interest if, say, they've managed your assets. Well, their fee is based on assets. They have an interest in you keeping more assets invested with them rather than, say, paying off your mortgage. So that's a potential conflict of interest and everyone has them. What you're looking for is an advisor that knows what they are and has minimized those.
Question to ask a potential adviser: what are your credentials? The credentials that you're looking for are the CFP®, CERTIFIED FINANCIAL PLANNER mark, the CFA® designation, Chartered Financial Analyst, and a CPA even, a certified public accountant. Those are the three credentials that I would look for in someone that was managing my money.
CPAs, they know taxes, but some are better at the investment side than others. So I would lean towards the CFP® and CFA® designations. But all three are legit. All three are people who are who have passed rigorous examinations that require study and experience for minimum requirements. So you can rest assured, that those people know what they're doing.
All right, my last question that I feel is really important to ask a potential financial adviser: who manages your money and how is it invested? Now, what you're looking for here is that, "Hey I manage my money and I invest it the exact same way that I invest my clients’ money."
You know for me, it's different levels of risk, so I have different proportions, but it's the same investments across all my clients’ portfolios that I have in my portfolio. I'm not going to do anything differently for me than I think is in my clients’ best interests, right?
So I have my philosophy, I stick to it. And then I’m not doing one of those, "Hey we got pool, we got a pond. Pond's good for you," kind of deal, right? Do you want to deal with that person? Absolutely not! You want someone that's eating their own cooking. So that's my final question that I think is extremely important to ask your advisor.
Folks, thank you so much for watching this video. I hope you got something out of it. Click the link below and download this checklist with all these questions as you're interviewing financial planners. If you like this video, click "like" and consider subscribing if you want more of these types of videos. Leave a comment below. Tell me what you're looking for, what you liked what you didn't like.
Until next time, I'm Patrick King. This is Transformative Television. And take a deep breath. You got this!